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Dynamic Scoring Stands Up to Criticism

2 min readBy: Alan Cole

A piece from Christopher Flavelle at Bloomberg yesterday discussed dynamic scoringDynamic scoring estimates the effect of tax changes on key economic factors, such as jobs, wages, investment, federal revenue, and GDP. It is a tool policymakers can use to differentiate between tax changes that look similar using conventional scoring but have vastly different effects on economic growth. , and the thoughts of former Republican directors of the Congressional Budget Office on the subject. He sees the remarks of the former directors as a case against dynamic scoring, but it’s somewhat hard to see why. If anything, their remarks seem to refute the most common arguments against dynamic scoring.

One criticism of dynamic scoring is that its results would be too optimistic. Douglas Holtz-Eakin, who ran the budget office in the early 2000s, said that dynamic scores would have only a limited impact. It is unclear to me why Holtz-Eakin’s measured, moderate view of the benefits should be perceived as an argument against the idea.

Another criticism of dynamic scoring is that it is ideologically biased, but Holtz-Eakin said that the CBO staff would continue to base its assumptions on the consensus of economic literature. It is unclear why this is a case against dynamic scoring either.

I did get a chuckle out of this line:

The problem, [Former CBO Director Donald] Marron said, is that dynamic scoring is a lot harder than it sounds. “Folks should not think there’s a model, and you tweak it and it spits out a new thing,” he said. “It’s a lot of work to do macroeconomic proposals.”

At TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Foundation, actually, this is exactly how it works. We can just plug in the tax policy and get the results. That is because we have spent several years of work making a single, customizable model for tax plans. It includes all aspects of the federal tax system. Every rate, bracket, exemption, deduction, or credit is a variable we can modify. A strength of our model’s versatility is that every tax bill is scored under the same exact assumptions.

After we put in the tax changes, we can see the results on the national income and product accounts in minutes.

We are certainly open to debate on economic assumptions. The policy world always has had lively debate on that subject. We are open to debate on what “reality-based” scoring should actually look like. But it is a truth based in reality that nimble, powerful, versatile tax models are possible to construct, and we have one here at the Tax Foundation.